RBS debt unit 'failed more than 90% of small business customers'

Investigators concluded that GRG staff had not given “consideration to the longer-term viability of customers” (Image: Getty Images)

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More than 90 per cent of small business customers referred to the controversial restructuring unit within Royal Bank of Scotland during the financial crisis ended up liquidated or in long-term intensive care.

That is the conclusion of the final summary of the Financial Conduct Authority's (FCA's) investigation into the now-defunct global restructuring group (GRG) within RBS.

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In its assessment of RBS – which remains 70 per cent owned by the taxpayer – investigators concluded that GRG staff had not given “consideration to the longer-term viability of customers” and demonstrated a “failure to handle the conflicts of interest” inherent in its systems.

Rather than receiving intensive assistance to get their books in order and restructure their liabilities, approximately one-third of clients referred to the unit ended up insolvent.

The FCA had previously refused to release its report into the mishandling of client accounts at RBS, despite coming under severe pressure to do so. A series of changes have been made to its initial summary following recommendations in a specialist advisers' report to the Treasury Select Committee spearheaded by Andrew Green QC.

“Some elements of this inappropriate treatment of customers were also considered by the independent review to be systematic, resulting from a failure on the part of RBS to fully recognise and manage the conflicts of interest inherent in what were described at GRG's 'twin' commercial and turnaround objectives and to put in place the appropriate governance and oversight procedures to ensure that a reasonable balance was struck between the interests of RBS and SME customers,” today's summary states.

Allegation about failures to manage these conflicts were first publicised by a report compiled by entrepreneur Lawrence Tomlinson for the Department of Business, Innovation and Skills in 2013.

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The FCA announced shortly thereafter that it would investigate senior managers at the GRG unit. Its final report was completed a year ago, but has only been released in part amid claims by RBS that the publication of the full report could be an offence under the Financial Services and Marketing Act.

Following a leak of the report in August, Nicky Morgan, chair of the Treasury Select Committee, has threatened to use “formal powers” to demand full publication of the report. The FCA has said that the most serious allegations – that RBS used the GRG unit to asset-strip vulnerable SMEs – were not supported by its investigation.